Housing shows life; can the economy be far behind?

The latest indicator that the U.S. economy is on the upswing can probably be found on the street where you live: It's the "sold" sign planted in the neighbor's yard.

Perhaps you hadn't noticed, but the real estate industry is not the moribund mess you might remember from the crash. U.S. housing prices rose in March for the biggest gain in seven years and the fourth consecutive quarter of year-over-year improvement.

Meanwhile, the consumer confidence level was reported at its highest point since February 2008, at 76.2 percent, according to The Conference Board. That's a leap from 69 percent in April.

The positive economic news was heard loudly on Wall Street, where stocks rose today despite recent concerns about falling prices on Japan's Nikkei, a "bubble" in the record-high domestic market and previous reports that indicated U.S. economic growth slowed in the second quarter to between 1.5 percent and 2 percent from 2.5 percent in the first quarter. The Dow Jones Industrial Average ended the day up 106 points or nearly .7 percent higher, setting a new record closing high of 15,409.

That's not to suggest that everything is rosy and the nation is about to experience a replay of the go-go 1990s for economic growth. There are still plenty of signs of slowness in nonhousing markets (manufacturing was barely in an expansion mode last month), and high unemployment continues to be a worry, but perhaps it's time to allow ourselves a bit more optimism.

Unemployment claims are down, and the budget deficit is shrinking. And Federal Reserve Chairman Ben Bernanke's announcement last week that he intends to gradually slow bond purchases as the economy sustains its momentum is making a lot of sense. Economic stimulus may no longer be the order of the day, but it's not time to go cold turkey quite yet either.

If average Americans can see this — and feel better about their financial prospects — why can't Washington get its house in order and at least get out of the way? The failure of Congress, the branch in charge of setting tax and spending priorities, to plot a rational, predictable course for the near term, let along the future, may be one of the last obstacles left to a full recovery.

Experts say sequestration — the automatic budget cuts that President Barack Obama has derided as mindless — has probably reduced economic growth this year by 0.6 percent. How much further would the nation be on the path to reasonable employment levels if Congress and the White House could hash out a "grand bargain" that removes this obstacle from the picture?

Admittedly, it appears to be too much to ask to expect Republicans to accept even the kinds of tax reform many of them have previously supported (at least if doing so would generate additional revenue and could thereby be called a "tax increase"). That, in turn, gives President Obama little incentive to push Democrats for the kind of entitlement reforms that are needed to put the federal government on a truly sustainable direction on the budget in the long term.

But at least House Republicans should agree not to create another phony debt ceiling crisis. The next deadline is pegged at Aug. 2, and here's the best sign we've seen so far on that front: Not much noise is being made about it. Either that's because the GOP has learned from the mistakes of the past or it's waiting for the real drop-dead date (when the federal government won't be able to pay its bills), which may not arise until fall.

In the meantime, the latest news at least offers reassurance that the days of widespread foreclosure sales and underwater mortgages are drawing to a close. Those "sold" signs are as welcome a sight as those improved 401(k) balances made possible by stock market gains. How much longer will it last? We don't know. Some experts were talking about the market being on the verge of a correction just last week, and you can see how brilliant they turned out to be.

Perhaps the best thing is to hope that Congress will just sit on its hands and not actively damage the economy with further job-killing austerity cuts or trumped-up budget crises that put the heebie-jeebies into consumers and investors alike. A robust housing market has boosted employment before, and it might just be able to do it again.

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